Kenya

#Kenya's Islamic finance drive to tackle taxes, governance

Kenya plans to develop Islamic finance through a wide-ranging taxation review and the establishment of a national sharia board. The country wants to build up the industry as part of a long-term plan to turn Nairobi into an international financial centre. The initiatives are being led by the Islamic Finance Project Management Office (PMO), a body setup recently to coordinate efforts among Kenya's regulatory agencies. According to finance consultant Farrukh Raza, the PMO has submitted an initial set of policy amendments focused on taxation of sharia-compliant products. A second batch of policy amendments will be presented by the end of this year, covering banking, insurance, pensions and capital market products. Kenya's National Treasury has said it is looking at the possibility of a debut sale of sukuk, although it has yet to finalize details for such an issuance.

Treasury moves in to seal Islamic finance loopholes

Despite the efforts of the #Kenyan regulators, some toxic products have been allowed into the market under the banner of Islamic finance. The lack of clarity among regulators has allowed unscrupulous managers to mask certain offerings as Islamic, which has tainted the sub-sector’s reputation in recent months. Chase Bank was placed under receivership in April after special purpose investment vehicles it had classified as Islamic products were contested. Juma Makomba, the Sharia compliance manager at Takaful Insurance of Africa, said Chase Bank was not brought down by Islamic banking products because the facility would have qualified as a Qard-Hassan. He added that Qard-Hassan is given to somebody who is in distress, but the product they were calling a Qard-Hassan was in fact Musharakah.

#Kenya sets up body to manage push into Islamic finance

Kenya launched an office dedicated to oversee its Islamic finance industry and help prepare for the issue a debut sovereign shariah-compliant bond. With 11% of Muslim population, Kenya has seen the emergence of Islamic institutions in recent years, including two banks, five Islamic banking windows offered by commercial lenders, insurance firms and a unit trust fund. The government wants to build up the industry as part of a long-term plan to turn Nairobi into an International Financial Centre. Kenya, which has applied to become a member of the Islamic Financial Services board, is carrying out legal and policy reforms to facilitate the growth of the industry. According to Kamau Thugge, the principal secretary at the Treasury, the government will consider issuing a sovereign Sukuk as soon as the legal and policy reforms are implemented.

HELB plans for shariah compliant loans

In #Kenya the Higher Education Loans Board (HELB) is set to introduce Shariah compliant products. The proposal to make the students loan provider Shariah compliant is currently being reviewed by the Attorney-General, prof Githu Muigai. Once approved, the law will improve access for Muslim students to educational financial support helping them to obtain loans which do not infringe on their religious beliefs. The number of Muslim students at universities has been on a gradual rise and the move will be of great benefit. HELB Chief Executive Charles Ringera said the board was with Islamic finance experts in the implementation of the policy.

Islamic financing costs limit use in public projects

The high transaction costs involved in Islamic financing are likely to limit its use in funding infrastructure projects in Kenya. According to a new study commissioned by the Kenya Bankers Association (KBA) Islamic financing is deemed to be expensive. This fact is corroborated by the case study of Lekki project which utilised a loan financing scheme that attracts huge transaction costs paid by the special purpose company in terms of 1.5-4.0% one-off administration fees and notary fees. The working paper also recommended that a national Sharia board be set up so as to set standards for Islamic finance.

Client wants NBK’s Islamic banking shut in Sh3.7bn row

In #Kenya a National Bank customer has asked the High Court to shut down the lender’s Islamic banking wing while demanding Sh3.7 billion compensation over a loan repayment dispute. Tulla Reserve Supplies claims National Bank illegally changed his facility from a fixed term loan to a revolving musharaka loan, effectively raising the interest rate from 18.5% to an Islamic profit-sharing equivalent of 19.5%. Director Diba Hussein Dado holds that the alleged switch to a revolving musharaka loan left his firm owing Sh922 million to National Bank. His firm supplied grains to Kenya Prisons, Unga Limited and World Food Programme (WFP). But National Bank insists that the contracts it signed with Tulla were for revolving facilities and Mr Diba has opted to feign ignorance in the hope of building a case against National Bank.

Sharia-compliant Helb loans plan for Muslim students

In #Kenya the Higher Education Loans Board (Helb) has announced plans to introduce a Sharia-compliant product as a growing number of Muslim students join local universities. Helb CEO Charles Ringera said the proposal is contained in a Bill that is currently with the Attorney-General Githu Muigai for review. The new product will most likely assume the structure of Takaful finance. To roll out such a product, Helb will have to come up with special loan forms that require beneficiaries to commit that they will repay a Takaful contribution for the benefit of future students.

CMA Banks on Islamic financing to address interest rates law shocks

The Capital Markets Authority (CMA) of #Kenya is banking on introduction of non-conventional financing options. According to CEO Paul Muthaura the move aims to absorb anticipated economic shocks arising from capping of interest rates. Last week, President Uhuru Kenyatta assented to the Banking Act 2015, which will cap interest rates to not more than 4% above the Central Bank of Kenya rate. The CMA plans to introduce Sharia financing where interest rates don’t feature but have an element of risk management. The CMA is also working on establishment of a Sharia Board that would screen all the products being offered so that it can determine their suitability to be treated as Sharia products.

Learn about the interest free Islamic Banking

The growth of the Islamic finance industry has generated considerable interest and discussion in the financial world markets in recent years. According to a Senior Lecturer at the University of Nairobi School of Business Abdulatif Essajee, lack of information has inhibited the growth of the sector in Kenya. He projects a 25% growth in the coming years. The fastest growing segment in the world is the Issuance of Islamic bonds (Sukuk). In Kenya, the fastest growing segment is Islamic banking.

Gulf African Bank: Why we don't lend to casinos, breweries

In #Kenya the Gulf African Bank has ambitious expansion plans for the local market. The bank, which is so far only represented in five counties, plans to open ten new branches between 2016 and 2017. Follwoing Sharia rules, the bank does not finance casinos, breweries and anything that is hazardous to the human body. Gulf African Bank is stable and prepared to increase core capital which now stands at Sh3.8 billion. At the end of the year the bank's capital will be above Sh4 billion, while by 2017 above Sh5 billion.

What’s hindering Islamic finance growth in #Kenya?

Kenya has a higher percentage of Christians compared to Muslims, but this country is seeing a surge in Islamic financing. According to Rahma Hassan Hersi, Managing Partner at Awal Consulting, the lack of regulations is deterring potential growth. There is a need to address this issue in tandem with the central bank. There is also very limited expertise. The penetration of Islamic finance in Kenya is estimated at 2% with a limited number of banks and insurance companies playing in that space.

Banking: Dubai Islamic Bank aims to open in Kenya

Dubai Islamic Bank (DIB) plans to be operating in Kenya before the end of 2016, despite the Kenyan authorities' moratorium on issuing new banking licences. Kenyan banks have come under closer scrutiny from the regulator because of increasing bad debts, prompting officials and analysts to conclude the sector is ripe for consolidation. Three medium-sized and small banks have been taken over by the regulator since August last year. DIB had been in talks with the regulator before the moratorium was placed on the licensing of new commercial banks last November, meaning it would not affect a decision on its licence.

Banking on faith

A report in one of the dailies suggesting that Islamic banking contributed to the collapse of Chase Bank is based on unfounded information. The facts as emphasised by Central Bank of Kenya Governor Patrick Njoroge are clear; that the underlying reason for the closure of the bank was under-reported insider lending by the directors and irresponsible use of social media, which accelerated the massive liquidity problems. Chase Bank is not the first bank to collapse and several others, which had no dealing with Islamic banking, have gone under. It is therefore insensitive to blame the collapse of Chase Bank on the Islamic banking system, which has proved to be an alternative and viable finance system.

UPDATE 2-Kenya reviews Islamic finance laws ahead of debut sukuk

Kenya is reviewing all laws and regulations governing its nascent Islamic finance industry to aid the issuance of a debut Islamic law-compliant bond, its attorney general said. The East African nation, which issued its first Eurobond in 2014, wants to expand the range of financing available for infrastructure projects like roads and power plants. The Treasury has said it is looking at the possibility of issuing the sukuk in the 2016/17 fiscal year, starting in July, but it has not offered details. Githu Muigai the review of that entire regulatory framework will be completed in a maximum of nine months. Kenya's central bank licensed two shariah-compliant banks in 2007. At least one firm has since started to offer Shariah-compliant insurance products.

Kenyan government to institute Islamic Finance

Kenya is preparing to allow the use of Islamic finance, and is even preparing to launch its first sukuk. Speaking at the International Islamic Finance conference of Africa in Nairobi on Monday, Treasury Secretary Henry Rotich said that the Kenyan government would adopt legislation that would make Islamic finance possible. The conference is intended to aid developing countries in Africa to tap into the $2.1 trillion market of Islamic finance, using it as a catalyst of economic growth. Kenya can learn about the application of Islamic finance by taking advice from Muslim countries, Rotich said. Policymakers’ business leaders and government officials spent Monday and Tuesday speaking on how Islamic financial principles can help combat poverty and alleviate poverty in Africa.

Islamic Financing Will Spur Economy

President Uhuru Kenyatta is hosting two leaders of Africa’s Ieading economies, Muhammadu Buhari of Nigeria and Abdel Fattah el-Sisi of Egypt. These visits are to be viewed within the prism of Uhuru’s broader strategy of economic, trade, and cross-cultural bridgebuilding. They underline his growing clout not just in trade and commerce, but also in the cut-throat arena of global geopolitics and nuanced national interests. The booming African Islamic economy provides an opportune vehicle to ameliorate the deprived conditions and lack of economic opportunity. It is a perfect fit for our infrastructure financing needs. Uhuru signed three agreements and four MoUs to promote trade between Kenya and Nigeria in June 2014 – on Trade and Agricultural cooperation, immigration and drug trafficking. A Joint Business Council was formed.

IIUI holds international moot on Islamic finance

Speakers at a conference have urged the financial institutions and civil society to play their role by supporting an inclusive financial sector policy framework for equal access to financial services.
The workshop, which was attended by the scholars of Indonesia, Nigeria, Kenya, Kingdom of Saudi Arabia, Uganda, Sudan and US, is focused on bringing forth recommendations that will help in devising sustainable strategy for development of inclusive finance.
The two-day moot is jointly organised by International Institute for Islamic Economics of IIUI in collaboration with Islamic Research and Training Institute, Islamic Development Bank, Jeddah.
Speaking on the occasion as the chief guest, Islamic International University Islamabad President Dr Ahmed Yousif Al-Draiweesh stressed on the Muslim economic researchers to work for devising strategies for an interest-free transparent economic system. He was of the view that financial issues be observed in the light of Islamic teachings. The IIUI president hoped that conference would bring beneficial and significant recommendations pertaining to the financial and economic issues.

Kenya to host first East Africa Islamic Finance Summit

Kenya is set to host the first East Africa Islamic Finance Summit (EIAFS2015) that will be held on December 14th at Nairobi’s Villa Rosa Kempinski. The Cabinet Secretary for Treasury Henry Rotich will give a presentation on Kenya’s role in developing East Africa as an Islamic Finance investment destination. The summit themed “Unveiling opportunities”, aims to initiate dialogue, build network between East Africa’s financial institutions, policy makers and the Islamic Finance institutions in the region and the Middle East. Experts in Islamic Finance will discuss the development of Islamic Finance in East Africa, explore infrastructure projects in the region and discuss alternative opportunities for project and trade finance for both public and private sector projects.

Kenya: Islamic Finance Prospects in Africa Promising

Africa's strong demand for Islamic financial services and products was highlighted in the inaugural Africa Finance Forum 2015 held in Abidjan. Recent developments have seen African governments focusing more on creating a more enabling environment for sukuk issuances. Those that have not tapped into the sector have expressed keen interest in the market for infrastructure financing with legal frameworks underway to promote sukuk issuances. Although the Islamic financial services industry in Africa is currently dominated by the banking and sukuk segments, growth potential remains in the asset management and Islamic insurance. However, financial inclusion still remains the greatest challenge.

Kenya regulator opens takaful market to conventional insurers

Kenya's regulator has introduced new takaful rules which will allow the entry of conventional players into the sector. The rules will come into effect in June with firms required to adhere to the requirements by December, according to a document from Kenya's Insurance Regulatory Authority. This would see Kenya join the countries such as Pakistan and Indonesia in allowing takaful windows. Kenya's first full-fledged takaful firm was launched in 2011, Takaful Insurance of Africa. Islamic lender First Community Bank also operates a takaful scheme while Kenya Reinsurance Corp has developed a sharia-compliant reinsurance product of its own.

Syndicate content